[Federal Register Volume 71, Number 143 (Wednesday, July 26, 2006)]
[Notices]
[Pages 42424-42427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11897]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27421; File No. 812-13243]
AXA Equitable Life Insurance Company, et al.; Notice of
Application
July 20, 2006.
AGENCY: Securities and Exchange Commission (``SEC'' or the
``Commission'').
ACTION: Notice of application for an amended order under Section 6(c)
of the Investment Company Act of 1940, as amended (``Act''), granting
exemptions from the provisions of Sections 2(a)(32), 22(c) and
27(i)(2)(A) of the Act and Rule 22c-1 thereunder.
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Applicants: AXA Equitable Life Insurance Company (``AXA Equitable''),
AXA Life and Annuity Company (``AXA Life and Annuity,'' and together
with AXA Equitable, ``the Company''), Separate Account No. 45 of AXA
Equitable, Separate Account No. 49 of AXA Equitable (``SA 49''),
Separate Account VA of AXA Life and Annuity (the foregoing separate
accounts each an ``Account,'' and collectively, the ``Accounts''), AXA
Advisors, LLC, and AXA Distributors, LLC (collectively,
``Applicants'').
Summary of Application: Applicants seek an order to amend an Existing
Order (defined below) to grant exemptions from the provisions of
Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the Act and Rule 22c-1
thereunder to the extent necessary to permit Applicants to recapture
certain credits applied to contributions made under certain amended
deferred variable annuity contracts and certificates (``credits''),
described herein, including certain amended certificate data pages and
endorsements, that AXA Equitable will issue through the Accounts (the
``2006 Amended Contracts''), and under contracts and certificates,
including certain certificate data pages and endorsements, that AXA
Equitable may issue in the future through the Accounts, and any other
separate accounts of AXA Equitable or AXA Life and Annuity
(collectively, ``Future Accounts'') that are substantially similar in
all material respects to the 2006 Amended Contracts (the ``Future
Contracts''). Applicants also request that the order being sought
extend to ``Equitable Broker-Dealers,'' as defined in the applications
for the Existing Order (defined below) (``Prior Applications'').\1\
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\1\ The Equitable Life Assurance Society of the United States,
Rel. Nos. IC-23774 (Apr. 7, 1999) (File No. 812-11388), 23889 (July
2, 1999) (File No. 812-11662), 24963 (April 26, 2001) (File No. 812-
12392), and 26170 (August 26, 2003) (File No. 812-13010).
Filing Date: The application was filed on October 24, 2005, and amended
and restated applications were filed on March 29, 2006, and July 11,
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2006.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Secretary of the
Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on August 18, 2006, and should be accompanied
by proof of service on Applicants in the form of an affidavit or,
[[Page 42425]]
for lawyers, a certificate of service. Hearing requests should state
the nature of the requester's interest, the reason for the request, and
the issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090. Applicants, c/o AXA Equitable Life
Insurance Company, 1290 Avenue of the Americas, New York, NY 10104,
Attn: Dodie Kent, Esq., copy to Goodwin Procter LLP, 901 New York Ave.,
NW., Washington, DC 20001, Attn: Christopher E. Palmer.
FOR FURTHER INFORMATION CONTACT: Sonny Oh, Staff Attorney, or Zandra
Bailes, Branch Chief, Office of Insurance Products, Division of
Investment Management at (202) 551-6795.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 100 F Street, NE., Room 1580,
Washington, DC 20549 (tel. (202) 551-8090).
Applicants' Representations
1. On May 3, 1999, the Commission issued an order (``May 1999
Order'') \2\ exempting certain transactions of Applicants from the
provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the Act and
Rule 22c-1 thereunder. The May 1999 Order specifically permits the
recapture, under specified circumstances, of certain 3% Credits applied
to contributions made under the Contracts or the Future Contracts as
defined in the application for the May 1999 Order. Specifically, the
May 1999 Order permits recapture of Credits if the Contract is returned
during the free look period or if contributions are made within three
years of annuitization.
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\2\ The Equitable Life Assurance Society of the United States,
Rel. No. IC-23822 (May 3, 1999) (File No. 812-11388).
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2. On July 28, 1999, the Commission issued an order of exemption
amending the May 1999 Order (``July 1999 Order'') \3\ to permit the
recapture of Credits of up to 5% under the Contracts or the Future
Contracts under the same specified circumstances.
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\3\ The Equitable Life Assurance Society of the United States,
Rel. No. IC-23924 (July 28, 1999) (File No. 812-11662).
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3. On May 21, 2001, the Commission issued an order of exemption
(``May 2001 Order'') \4\ amending the July 1999 Order to permit the
recapture of Credits of up to 6% under the Contracts and the Future
Contracts under the same and certain two additional circumstances. The
additional circumstances include the recapture of Excess Credits when a
Contract owner's Net First Year Contributions are lower than Total
First Year Contributions, and when a Contract owner fails to fulfill
the conditions of a Letter of Intent; all as described in the
application for the May 2001 Order.\5\
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\4\ The Equitable Life Assurance Society of the United States,
Rel. No. IC-24980 (May 21, 2001) (File No. 812-12392).
\5\ The Equitable Life Assurance Society of the United States,
Rel. No. IC-24963 (April 26, 2001) (File No. 812-12392).
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4. On September 26, 2003, the Commission issued an order of
exemption (``September 2003 Order'') \6\ amending the May 2001 Order
(together with the May 1999 Order, the July 1999 Order and the May 2001
Order, the ``Existing Order'') to permit the recapture of Credits of up
to 6% under amended contracts (``Amended Contracts'') and Future
Contracts, as defined in the application for the September 2003 Order,
under the same and one additional circumstance. The additional
circumstance includes the recapture of Credits when a Contract owner
starts receiving annuity payments under a life contingent annuity
payout option before the fifth contract date anniversary, as described
in the application for the September 2003 Order.\7\
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\6\ The Equitable Life Assurance Society of the United States,
Rel. No. IC-26192 (Sept. 26, 2003) (File No. 812-13010).
\7\ The Equitable Life Assurance Society of the United States,
Rel. No. IC-26170 (August 26, 2003) (File No. 812-13010). The
prospectus for the Amended Contracts is included in a registration
statement on Form N-4 for SA 49, Reg. No. 333-64749. The Amended
Contracts covered by that prospectus are referred to as the
Accumulator[reg]Plus\SM\ 04 Contracts.
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5. The Amended Contracts provide for a death benefit payment upon
the death of the annuitant. The death benefit payment is equal to the
greater of: (1) The account value as of the date the Company receives
satisfactory proof of death and other required forms and information;
or (2) any applicable guaranteed minimum death benefit (``GMDB'') on
the date of death (adjusted for any subsequent withdrawals, withdrawal
charges and taxes that apply). Each GMDB is based on its related
benefit base. The GMDB may be based on a benefit base calculated, in
whole or in part, on contributions, but contributions for the purposes
of this calculation do not include any Credits; or in part, on the
highest account value as of particular dates, such as Contract
anniversaries. The account value on a particular date includes any
previously granted Credits, with any changes in value due to charges
and investment performance.
6. The Amended Contracts provide a benefit option called
``Protection Plus.'' For an additional charge, the optional Protection
Plus benefit provides an additional death benefit amount equal to 40%
(25% for certain annuity issue ages) of the death benefit amount less
total net contributions.
7. The Amended Contracts offer a guaranteed principal benefit
(``GPB'') with two options. Under the first option (``GPB Type A''),
the owner selects a fixed maturity option, and the Company specifies
the portion of the initial contribution to be allocated to that fixed
maturity option in an amount that will cause the value to equal the
amount of the entire initial contribution (including any Credits) on
the fixed maturity option's maturity date. Under the second option
(``GPB Type B''), the Company specifies the portion of contributions to
be allocated to one or more specified investment options. If on the
benefit maturity date the account value is less than the amount
guaranteed under GPB Type B, the Company increases the account value to
be equal to the guaranteed amount. The guaranteed amount under the GPB
Type B is equal to the initial contribution adjusted for any additional
permitted contributions (excluding any Credits), withdrawals from the
Contract, and in some cases transfers out of a specified fixed maturity
option.
8. The Amended Contracts offer an optional guaranteed withdrawal
benefit called ``Principal Protector'' (``GWB''). The GWB permits the
owner to withdraw certain guaranteed amounts on an annual basis even if
the account value falls to zero. The guaranteed withdrawal amounts are
calculated using a GWB benefit base. The GWB benefit base is initially
based on the initial contribution (not including any Credit).
9. The Amended Contracts include various options permitting under
some circumstances the Amended Contract to be continued after a death
of an annuitant that would otherwise trigger a death benefit payment.
In those circumstances, the account value will be increased to the
amount that would have been paid under a death benefit payment if such
death benefit is greater than current account value. These options are
described below.
10. Under the successor owner/annuitant option, if a spouse is the
sole primary beneficiary or joint owner, and the annuitant dies, the
spouse may elect to receive the death benefit or continue the Contract
as successor owner/annuitant. If the surviving spouse
[[Page 42426]]
decides to continue the Contract, the Company increases the account
value to equal any elected GMDB, if greater, plus any amount applicable
under the Protection Plus additional death benefit, adjusted for any
subsequent withdrawals.
11. The spousal protection option permits, under some
circumstances, spouses who are joint owners to increase the account
value to equal the GMDB, if greater, plus any amount applicable under
the Protection Plus additional death benefit, adjusted for any
subsequent withdrawals.
12. The beneficiary continuation option permits an individual to
maintain a Contract in the deceased owner's name and receive
distributions under the Contract, instead of receiving the death
benefit in a single sum. If this election is made, the Company
increases the account value to equal any elected GMDB, if greater, plus
any amount applicable under the Protection Plus additional death
benefit, adjusted for any subsequent withdrawals. If the owner/
annuitant dies, and the beneficiary continues GWB under the beneficiary
continuation option, the GWB benefit base will be stepped-up to equal
the account value, if higher, as of the transaction date that the
Company receives the beneficiary continuation option election.
13. Subject to any necessary regulatory approvals, the Company
intends to offer a further amended version of the Amended Contracts
(the ``2006 Amended Contracts''). The 2006 Amended Contracts will
provide that, if the owner (or one of the joint owners) or annuitant
dies within one year following the Company's receipt of a contribution
to which Credit was applied, and that death triggers the calculation of
a death benefit payment or recalculation of a benefit based on account
value, the Company will reduce the account value by the amount of the
Credit (or pro rated amount if required by state law).
14. The 2006 Amended Contracts will be issued through SA 49. Units
of interest in SA 49 under the 2006 Amended Contracts will be
registered under the Securities Act of 1933.\8\ The Company may issue
Future Contracts through SA 49, the other Accounts or Future Accounts.
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\8\ On March 6, 2006, AXA Equitable and SA 49 filed a prospectus
supplement for the Accumulator[reg]Plus\SM\ 04 Contracts (Reg. No.
333-64749) reflecting the Credit recapture within one year of death
(and noting that any such recapture is subject to obtaining the
exemptive order requested). See footnote 7 for information
identifying the prospectus for the Accumulator[reg]Plus\SM\ 04
Contracts.
In addition, on or about July 10, 2006, AXA Equitable plans to
file in Reg. No. 333-64749 a new prospectus for a new generation of
the Accumulator[reg]Plus\SM\ Contract, which will be referred to as
the Accumulator[reg]Plus\SM\ 06 Contract, which is designed to
replace the Accumulator[reg]Plus\SM\ 04 Contracts as necessary state
approvals are obtained. The Accumulator[reg]Plus\SM\ 06 Contract
will also include the Credit recapture within one year of death.
The references in the application to the ``2006 Amended
Contracts'' includes both Accumulator[reg]Plus\SM\ 04 Contracts with
the addition of the Credit recapture within one year of death and
all the Accumulator[reg]Plus\SM\ 06 Contracts (because all such
Contracts will include the Credit recapture within one year of
death).
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15. That portion of the assets of each Account that is equal to the
reserves and other contract liabilities with respect to that Account is
not chargeable with liabilities arising out of any other business of
AXA Equitable or AXA Life and Annuity. Any income, gains or losses,
realized or unrealized, from assets allocated to an Account is, in
accordance with the relevant contracts, credited to or charged against
the Account, without regard to other income, gains or losses of AXA
Equitable or AXA Life and Annuity. The same will be true of any Future
Account of AXA Equitable or AXA Life and Annuity.
16. Applicants assert that the Amended Contracts and the 2006
Amended Contracts are substantially similar in all respects material to
the Existing Order and to the relief requested by the application,
except for the addition of one additional circumstance under which the
Company will recapture Credits applied to contributions. In particular,
under the 2006 Amended Contracts, if a death of an owner (or one of the
joint owners) or annuitant that would trigger a death benefit occurs
during the one-year period following the Company's receipt of a
contribution to which a Credit was applied, the Company will reduce the
account value by the amount of such Credit. However, the Credit
recapture does not vary based on whether the benefit is triggered by
the death of an owner or an annuitant and applies to any death that
would trigger a death benefit. This account value reduction may affect
the calculation of any death benefit payment, any supplemental death
benefit payment under the Protection Plus benefit and account value and
benefit calculations made at time of death when the Contract is
continued under the successor owner and annuitant option, the spousal
protection option, or the beneficiary continuation option. Each of
these effects of the Credit recapture is discussed below.
17. Under the 2006 Amended Contracts, the account value used in the
calculation of the death benefit payment will be reduced by the amount
of any Credit applied within one year prior to the death of the owner/
annuitant. The calculation of the GMDB will not be affected by the
Credit recapture. A Credit recapture will reduce the death benefit
payment if it causes the account value to fall below the GMDB or if the
GMDB was already less than the account value. The Credit recapture will
not affect the death benefit payment if the GMDB was greater than the
account value before the Credit recapture.
18. To the extent that the recapture of the Credit reduces the
death benefit payment amount, the recapture will also reduce the amount
of the Protection Plus additional death benefit payment.
19. If a surviving spouse decides to continue the Contract under
the successor owner/annuitant option, before calculating any possible
increase in account value, the current account value will be reduced by
the amount of any Credit applied within one year prior to the death of
the owner/annuitant.
20. Under the spousal protection option, before calculating any
possible increase in account value, the current account value will be
reduced by the amount of any Credit applied within one year prior to
the death of the owner/annuitant.
21. If the beneficiary continuation option is elected, the Company
increases the account value to equal any elected GMDB, but before
calculating any possible increase in account value, the current account
value will be reduced by the amount of any Credit applied within one
year prior to the death of the owner/annuitant.
22. Under the GWB benefit, if the owner/annuitant dies, and the
beneficiary continues GWB under the beneficiary continuation option,
the GWB benefit base will be stepped up to equal the account value.
However, in calculating the step-up, the account value will be reduced
by the amount of any Credit applied within one year prior to the death
of the owner/annuitant. Therefore, the GWB benefit base under the step-
up provision in connection with the beneficiary continuation option may
be lower due to the Credit recapture (under some Contracts, the GWB
ends if the beneficiary continuation option is selected; therefore,
there is no step-up in the benefit base and the Credit recapture has no
effect on the GWB benefit).
23. If a Contract continues under any successor owner/annuitant
feature, the account value may be reduced by the amount of any
recaptured Credit (as
[[Page 42427]]
described above). If any portion of the Credit is recaptured from the
fixed maturity option selected under GPB Type A, the amount in that
fixed maturity option may not grow to equal the initial contribution
plus the Credit. If any portion of the Credit is recaptured from a
fixed maturity option under GPB Type B, the account value in that
option would be reduced, but the guaranteed amount under GPB Type B
would not be affected by the Credit recapture.
Applicants' Legal Analysis
1. Section 6 (c) of the Act authorizes the Commission to exempt any
person, security or transaction, or any class or classes of persons,
securities or transactions from the provisions of the Act and the rules
promulgated thereunder if and to the extent that such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
2. Applicants request that the Commission issue an amended order
pursuant to Section 6(c) of the Act, granting exemptions from the
provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the Act and
Rule 22c-1 thereunder, to the extent necessary to permit Applicants to
recapture Credits under 2006 Amended Contracts under the same
circumstances covered by the Existing Order, and if a death benefit is
payable due to a death during the one-year period following the
Company's receipt of a contribution to which a Credit was applied, as
described above.
3. Applicants submit that the recapture of Credits under the 2006
Amended Contracts will not raise concerns under Sections 2(a)(32),
22(c) and 27(i)(2)(A) of the Act, and Rule 22c-1 thereunder for the
same reasons given in support of the Existing Order. Applicants submit
that when the Company recaptures any Credit, it is simply retrieving
its own assets. Applicants submit that a Contract owner's interest in
any Credit allocated on contributions made within one-year of the owner
or annuitant's death is not vested. Rather, the Company retains the
right to, and interest in, the Credit, although not any earnings
attributable to the Credit.
4. Applicants state that because a Contract owner's interest in any
recapturable Credit is not vested, the owner will not be deprived of a
proportionate share of the applicable Account's assets, i.e., a share
of the applicable Account's assets proportionate to the Contract
owner's annuity account value (taking into account the investment
experience attributable to any Credit). The amounts recaptured will
never exceed the Credits provided by the Company from its own general
account assets, and the Company will not recapture any gain
attributable to the Credit.
5. Furthermore, Applicants submit that the recapture of Credits
relating to contributions made within one year of death is designed to
provide the Company with a measure of protection against ``anti-
selection.'' The risk here is that rather than investing contributions
over a number of years, a Contract owner could make a contribution to
receive the benefits of the Credit shortly before the death (either
through an increased death benefit payment or an increased account
value or other benefit to a continuing owner), leaving the Company less
time to recover the cost of the Credit applied.
6. Like the recapture of Credits permitted by the Existing Order,
the amounts recaptured will equal the Credits provided by the Company
from its own general account assets, and any gain associated with the
Credit will remain part of the Contract owner's Contract value.
Applicants are aware of no reason why the relief provided by the
Existing Order should not also extend to the 2006 Amended Contracts.
7. For the foregoing reasons, Applicants submit that the provisions
for recapture of any Credit under the 2006 Amended Contracts do not
violate Section 2(a)(32), 22(c), and 27(i)(2)(A) of the Act, and Rule
22c-1 thereunder, and that the requested relief therefrom is consistent
with the exemptive relief provided under the Existing Order.
Conclusion
Applicants submit, based on the grounds summarized above, that
their request for an order that applies to the Accounts or any Future
Account in connection with the issuance of 2006 Amended Contracts
described herein and Future Contracts that are substantially similar in
all material respects to the 2006 Amended Contracts and underwritten or
distributed by AXA Advisors, LLC, AXA Distributors, LLC, or the
Equitable Broker-Dealers, is appropriate in the public interest for the
same reasons as those given in support of the Existing Order.
Applicants submit, based on the grounds summarized above, that their
exemptive request meets the standards set out in section 6(c) of the
Act, namely, that the exemptions requested are necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act, and that, therefore, the Commission should grant the requested
order.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-11897 Filed 7-25-06; 8:45 am]
BILLING CODE 8010-01-P